Westpac dodges rate rigging charges

The Federal Court has determined ASIC failed to prove Westpac manipulated the bank bill swap rate, but the judge found the bank engaged in unconscionable conduct.

Justice Beach of the Federal Court has handed down a 643-page judgement on a civil court case brought by ASIC that alleged Westpac manipulated the bank bill swap rate (BBSW).

In his judgement, Justice Beach found ASIC has "not made out its case against Westpac" concerning market manipulation or market rigging.

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However, he did find that Westpac engaged in unconscionable conduct under s12CC of the ASIC Act on four occasions (6 April 2010, 20 May 2010, 1 and 6 December 2010) "by trading Prime Bank Bills in the Bank Bill Market with the dominant purpose of influencing yields and where BBSW is set".

Westpac was also found to have contravened paragraphs 912A(1)(a), (c), (ca) and (f) of the Corporations Act, which relate to the obligations of financial services licensees to operate efficiently, honestly and fairly.

ASIC did not make out its case in respect to any of its other claims, said the judgement.

In his summary, Justice Beach said Westpac had failed to take "reasonable steps" to ensure its representatives did not engage in trading in Prime Bank Bills with the "sole or dominant purpose of manipulating the BBSW".

"Further, in my view Westpac failed to ensure that its traders were adequately trained not to engage in trading with such a sole or dominant purpose," said the judgement.

"This should have been reinforced and stipulated to them orally and in writing. In those circumstances, Westpac also contravened s 912A(1)(f)."